If you’re paying child support, bankruptcy won’t wipe out what you owe now or modify your future payments. Even so, bankruptcy can help. Here are a few things you’ll want to know:
Filing for bankruptcy prevents most creditors from collecting debts from you. Once the automatic stay goes into effect, a creditor must get permission from the court before continuing or initiating a collection action. But the automatic stay doesn’t apply to most child support procedures, including:
Other types of lawsuits you can’t stop with bankruptcy include criminal actions and suits that should move forward in the interest of justice. For instance, because the bankruptcy court needs a fraud trial judgment before declaring a debt nondischargeable due to fraud, the court would likely allow an ongoing fraud trial to proceed to judgment.
Learn more about when a court will lift the automatic stay.
The trustee will ask debtors owing child support to complete a form at the 341 meeting of creditors, the one hearing all bankruptcy filers must attend. You should be prepared to provide your current address, your last or current employer’s address, and information about your support obligation, including the name and address of the person to whom you owe it.
The trustee will use the information to inform the holder of the domestic support order of bankruptcy payment rights and the availability of child support collection services through the applicable state enforcement agency. Both the domestic support holder and the state enforcement agency will also receive notice of the bankruptcy discharge and collection information.
You can’t wipe out a child support obligation in bankruptcy—it’s nondischargeable. It’s also a “priority debt” that receives special treatment in bankruptcy. If money is available to pay creditors, child support obligations get paid first.
Learn more about the differences between Chapters 7 and 13.
Sometimes divorcing couples divide property unevenly. One spouse will take more assets and agree to pay the property’s value to the other over time, memorializing the transaction in a property division agreement. Why does this matter? Although a support obligation isn’t dischargeable in Chapter 13, a debtor can eliminate a property division debt—a fact that can take the unwary by surprise.
This information comes with several caveats, however. A property division debt discharge isn’t available in Chapter 7, and the property division agreement must be specific. If the bankruptcy court can’t separate the amounts intended for support and the property division, the court won’t discharge the property division portion (and you’ll likely need to pay the full amount). Also, not all jurisdictions handle these issues in the same way, so be sure to speak with a local bankruptcy lawyer about the procedures where you live or plan to file.
If you’re considering filing for bankruptcy and you owe child support, talk with a bankruptcy attorney. The lawyer will be able to explain your options and help you make the best choice for you. Plus, many offer a free initial consultation.